the impact of audit quality, the company's financial
TRANSCRIPT
The Impact of Audit Quality, the Company's Financial Condition,
Previous Year's Audit Opinion, Company Growth and Company
Size towards Going Concern Audit Opinion in manufacture in
Indonesia Stock Exchange (2015-2017)
SKRIPSI
Presented in partial fulfillment of the requirements for
The Bachelor’s Degree in Accounting
by
Isac Lewis H.
008201500054
FACULTY OF BUSINESS
ACCOUNTING STUDY PROGRAM
PRESIDENT UNIVERSITY
CIKARANG, BEKASI
2019
II
PLAGIARISM CHECK RESULT
III
IV
V
XI
TABLE OF CONTENTS
COVER PAGE ..................................................................................................... II
PLAGIARISM CHECK RESULT ..................................................................... II
DECLARATION OF ORIGINALITY ............................................................. VI
PANEL OF EXAMINERS APPROVAL ........................................................ VII
ACKNOWLEDGMENT.................................................................................. VIII
RECOMMENDATION LETTER FROM THESIS ADVISOR ....................... X
TABLE OF CONTENT ................................................................................... XIV
LIST OF FIGURES ......................................................................................... XIV
LIST OF TABLES ............................................................................................. XV
ABSTRACT ...................................................................................................... XVI
INTISARI ......................................................................................................... XVII
CHAPTER I - INTRODUCTION ....................................................................... 1
1.1 Research background................................................................................ 1
1.2 Research problem ..................................................................................... 3
1.3 Research Questions .................................................................................. 5
1.4 Research Objectives ................................................................................. 5
1.5 Research scope and limitation .................................................................. 6
1.6 Research benefits ...................................................................................... 6
CHAPTER II – LITERATURE REVIEW ......................................................... 8
2.1 Foundation Review and Research ............................................................ 8
2.1.1 Agency Theory .................................................................................. 8
2.1.2 Audit Opinion.................................................................................... 9
2.1.3 Audit Opinion Going Concern ........................................................ 12
2.2 Hypothesis Development........................................................................ 20
XII
2.2.1 Effect of audit quality on The tendency of Going Concern audit
opinion 20
2.2.2 Effect of financial conditions on the Tendency of Going concern
audit opinion .................................................................................................. 21
2.2.3 The effect of the going concern audit opinion of the previous year
on the tendency of going concern audit opinion ............................................ 22
2.2.4 The influence of company growth on the tendency of going concern
audit opinion .................................................................................................. 23
2.2.5 Effect of company size on the tendency of going concern audit
opinion 24
2.3 Research Framework .............................................................................. 25
CHAPTER III – RESEARCH METHOD ....................................................... 25
3.1 Data Colllecting and Processing ............................................................. 26
3.1.1 Population and Samples .................................................................. 26
3.1.2 Variable Measurement .................................................................... 27
3.2 Secondary Data ....................................................................................... 28
3.3 Variables and Measurements .................................................................. 28
3.3.1 Dependent Variable (Y) .................................................................. 28
3.3.2 Independent Variables (X) .............................................................. 29
3.4 Research Model ...................................................................................... 32
3.4.1 Descriptive Statistics Analysis ........................................................ 32
3.4.2 Inductive Statistics Analysis ........................................................... 32
CHAPTER IV – RESULT ANALYSIS, DISCUSSIONS AND
IMPLICATIONS................................................................................................. 37
4.1 Data Description ..................................................................................... 37
4.1.1 Descriptive Statistics ....................................................................... 37
XIII
4.1.2 Goodness of Fit Test ....................................................................... 41
4.1.3 Overall Model Fit Test .................................................................... 42
4.1.4 Simultaneous Test (F- Test) ............................................................ 43
4.1.5 Partial Test (T- Test) ....................................................................... 45
4.2 Result and Discussion............................................................................. 48
4.2.1 The Influence of Audit Quality on Audit Going Concern Opinion 48
4.2.2 The Influence of company financial condition on Audit Going
Concern Opinion ............................................................................................ 49
4.2.3 The Influence of Previous audit opinion on Audit Going Concern
Opinion 50
4.2.4 The Influence of Company growth on Audit Going Concern
Opinion 50
4.2.5 The Influence of company size on Audit Going Concern Opinion 51
CHAPTER 5 ........................................................................................................ 53
5.1 Conclusion .............................................................................................. 53
5.2 Limitations .............................................................................................. 54
5.3 Recommendations .................................................................................. 55
REFERENCES .................................................................................................... 56
APPENDICES ..................................................................................................... 59
XIV
LIST OF FIGURES
Figure 2.3 1 ........................................................................................................... 25
XV
LIST OF TABLES
Table 2.11 .............................................................................................................. 17
Table 3.1.12 ........................................................................................................... 26
Table 3.1.23 ........................................................................................................... 27
Table 3.3.2.24 ........................................................................................................ 31
Table 4.1.1 5 .......................................................................................................... 37
Table 4.1.26 ........................................................................................................... 42
Table 4.1.37 ........................................................................................................... 42
Table 4.1.48 ........................................................................................................... 44
Table 4.1.59 ........................................................................................................... 45
Tabel 4.1.610 ......................................................................................................... 46
XVI
ABSTRACT
This study aims to determine the effect of the relationship of audit quality, company
financial conditions, previous year's audit opinion, company growth and company
size towards the tendency of going concern audit opinion acceptance. The
population in this study are manufacturing companies listed on the Indonesia Stock
Exchange (IDX) in the period 2015-2017 that have been audited and published.
Sample selection was done by purposive sampling. Based on certain criteria
determined by the author, 66 samples were obtained. The method used to analyze
the relationship between variables is the logistic regression method. After analyzing
the data based on the Altman model, it was found that the audit quality variable, the
previous year's audit opinion, the company's financial condition did not
significantly influence the acceptance of going concern opinion using the Altman
Model. While company growth and company size have a positive effect on the
acceptance of the going concern audit opinion on the Altman model.
Keywords : Altman Model, audit quality, financial condition, audit opinion prior
year, company growth, company size, going concern audit opinion.
XVII
INTISARI
Penelitian ini bertujuan untuk mengetahui pengaruh hubungan dari kualitas audit,
kondisi keuangan perusahaan, opini audit tahun sebelumnya, pertumbuhan
perusahaan dan ukuran perusahaan terhadap kecenderungan penerimaan opini audit
going concern. Populasi dalam penelitian ini adalah perusahaan manufaktur yang
terdaftar di Bursa Efek Indonesia (BEI) pada periode tahun 2015 – 2017 yang telah
diaudit dan dipublikasikan. Pemilihan sampel dilakukan dengan purposive
sampling. Berdasarkan kriteria – kriteria tertentu yang ditentukan penulis, maka
diperoleh 66 sampel . Metode yang digunakan untuk menganalisis hubungan antar
variabel adalah metode regresi logistik. Setelah dilakukan analisis data berdasarkan
model altman, maka didapatkan hasil penelitian bahwa variabel kualitas audit, opini
audit tahun sebelumnya, kondisi keuangan perusahaan tidak berpengaruh signifikan
terhadap penerimaan opini going concern dengan menggunakan Altman Model.
Sedangkan pertumbuhan perusahaan dan ukuran perusahaan berpengaruh positif
terhadap penerimaan opini audit going concern pada model altman.
Kata Kunci : Altman Model, kualitas Audit, kondisi keuangan, opini audit tahun
sebelumnya, pertumbuhan perusahaan, ukuran perusahaan, opini audit going
concern.
1
CHAPTER I
INTRODUCTION
1.1 Research background
Going concern is the survival of an entity. Going is also a basic assumption in
the preparation of financial statement, a company is not intent or want to liquidate
or reduce business scale materially (Financial Accounting Standard, 2009)
Going concern used as an assumption in reporting the company’s financial
statement as long as there is no contrary information which could not support going
concern assumption. According to Peryataan Standar Akuntansi No.30 about
auditor's consideration of entities ability in maintaining its living, information that
is significantly considered contrary to the assumption that the survival of the
business unit is related with the inability of the business unit to fulfill obligations
when they fall tempo without selling most of the assets to outside parties through
ordinary business, debt restructuring, repairs to operations imposed from outside
and other similar activities.
Izquierdo et al. (2019) conducted a study that identified reactions of investors
to audit opinions that contain information on the company's survival based on
disclosure of the results of financial statement analysis. The study find evidence
that when investors will invest, they need to find out the financial condition of the
company, by looking at the auditor's report especially concerning the survival of
the company. Related to the importance of the audit opinion issued by the auditor,
2
then the auditor must be responsible for issuing the going concern audit opinion
consistent with the actual conditions. There are several factors that can be assessed
as a factor that influences the acceptance of going-concern audit opinion, which are
audit quality, company financial condition, previous year's audit opinion, company
growth and company size.
Good audit quality will produce useful information for users of financial
statements in terms of decision making. Auditors who have good audit quality tend
to issue a going concern audit opinion if the client has a going problem concern. As
expressed by William (2015) found research evidence that Top 4 Public Accounting
Firm were more likely to issue going concern audit opinions on companies that
experienced financial distress than non-Top 4 Public Accounting Firm. Large scale
auditors could provide better audit quality than small scale auditors, including in
expressing going concern problems. The greater the auditor scale, the more likely
the auditor to issue an audit opinion going concern.
The financial condition of the company describes the level of the company’s
health condition. Jamaluddin (2016) states that the more the condition of the
company is disrupted or worsens, the more likely the company will receive an audit
opinion going concern. Conversely, in companies that have never experienced
difficulties financial auditor never issues a going concern audit opinion. The going
concern audit opinion that has been received by the auditee in the previous year will
be an important consideration factor for the auditor in issuing the going concern
audit opinion for the current year if the auditee's financial condition does not show
3
signs of improvement or the absence of a management plan to improve the
company's condition.
A company with a positive sales growth ratio gives an indication that the
company is better able to maintain its survival and the possibility of the company
against bankruptcy is small. Therefore, the higher the company's sales growth ratio,
the less likely it is for the auditor to issue an audit going opinion concern. While
companies with negative sales growth ratios indicate a greater tendency towards
bankruptcy so that if management does not immediately take corrective action, the
company may not be able to maintain its survival.
William (2015) states that auditors more often issue going concern audit
opinions on small companies, because the auditor believes that large companies can
resolve the difficulties of the financial difficulties he faced from a small company.
In 2015, William conducted a study of the factors that influence audit reports on
companies that go bankrupt. The results provide empirical evidence that there is a
negative relationship between company size and acceptance of audit going opinion
concern.
1.2 Research problem
The researcher assumes that the research on going concern audit opinion
in Indonesia is still an important and interesting object of research because
considering that the going concern audit opinion of a business entity is one thing
that underlie investors in making investment decisions and also creditors in lending
funds with the aim of making a profit from the activity of the entity. In addition, the
4
audit opinion is going concern frequently linked to the company's management
capabilities for more maintain the viability of its business.
Based on the previous research that has been done by Badrun (2010) that
financial conditions, audit quality, previous year audit opinion, company growth,
and company size are not significant to going concern audit opinion. On the other
side, Alicia (2013) found that financial conditions, audit quality, previous year audit
opinion, company growth, and company size are not significant to going concern
audit opinion.
Based on no uniformity in the results of the study, researchers want to
explore and modify the previous research by adding several variables. The research
that will be conducted this time refers to the research that has been done by Tuttle
and Vandervelde in 2012 which entitled “Consequences of Going Concern Opinion
for Company”. The variables used in this study are audit quality, company financial
condition, previous year's audit opinion, growth company and company size. The
population used in this study is a manufacturing company listed on the Indonesia
Stock Exchange in the period 2015 - 2017. The reason for choosing a manufacturing
company is to avoid there is an industrial effect that is different industry risk among
an industrial sector one with another (Setyarno et al. 2006). The researcher would
like to propose the title of this research is “The Impact of Audit Quality, The
Company's Financial Condition, Previous Year's Audit Opinion, Company
Growth, snd the Size of The Company Towards The Tendency of Going Concern
Audit Opinion.”
5
1.3 Research Questions
Based on the background description described earlier, then the formulation of
the problem in this study are consist of the following questions:
1. Does audit quality affect the tendency of audit going concern opinion?
2. Does the company's financial condition affect trends acceptance of going
concern audit opinion?
3. Does the previous year's audit opinion affect trends acceptance of going
concern audit opinion?
4. Does the company's growth affect the possibility acceptance of going
concern audit opinion?
5. Does the size of the company affect the possibility of acceptance going
concern audit opinion?
1.4 Research Objectives
In accordance with the formulation of the problem above, the objectives of this
study are:
1. To find empirical evidence whether audit quality factors are influential
towards the tendency of going concern audit opinion.
2. To find empirical evidence on the factors in the company's financial condition
affect the tendency of going concern audit opinion.
3. To find empirical evidence on the previous year's audit opinion factor affect
the tendency of going concern audit opinion.
6
4. To find empirical evidence on the growth factor of the company affect the
tendency of going concern audit opinion.
5. To find empirical evidence on the size factor of the company affect the
tendency of going concern audit opinion.
1.5 Research scope and limitation
1.1.1 Research Scope
The scope of this research is manufacturing companies listed in Indonesia
Stock Exchange, for the period 2015-2017.
1.1.2 Research Limitation
Due the limitation of time, the researcher only focused on companies
related data for three years (2015-2017) and focus for several variable. This
research also did not contain any mediating or moderating variable, for the
future the researcher may add moderating or mediating variable to see the
research in another point of view. The future researcher might add new
variables that can be taken into consideration of factors that affect the tendency
of going concern audit opinion.
1.6 Research benefits
The results of this study are expected to provide benefits to:
1. Investor
The results of this study can provide information to investors regarding financial
condition of a public company listed on the Stock Exchange Indonesia,
7
moreover it can be used as consideration before the investors decide to invest
their money in one company.
2. Practitioners of Public Accountants, especially Auditors
This research can be useful for auditors especially in provide a going concern
audit opinion assessment to the auditee.
3. Future Researcher
The results of this study are expected to be used as reference material or
consideration in subsequent research and adding scientific discourse in auditing
and accounting is mainly concerned with factors that influence the tendency to
accept audit going opinion concern.
8
CHAPTER II
LITERATUR REVIEW
2.1 Foundation Review and Research
This section will explain the theory regarding going-concern audit opinion.
Besides this section also describes various aspects of research - previous research
especially research on going-concern audit opinion which is then explained as
follows.
2.1.1 Agency Theory
Susanto (2012) describe agency relations as a contract under one or more
principals involve agents to carry out some services for them with delegate decision
making authority to the agent. Well the principal and agent are assumed to be
rational and solely economic people motivated by personal interests. Shareholders
or principals delegate making decisions about the company to the manager or agent.
However, managers do not always act according to the wishes of shareholders,
partly because of moral hazard.
An independent third party is needed as a mediator in the relationship
between principal and agent. This third party functions to monitor the behavior of
the manager (agent) whether it has acted according to the principal's wishes. The
auditor is parties that are able to bridge the interests of the principal (shareholders)
with the manager (principal) in managing the company's finances (Setiawan, 2011).
The auditor performs the function of monitoring the manager's work through a
means, namely annual report. The auditor's job is to provide opinions on financial
9
statements about the reasonableness. In addition, the current auditor must also
considering the survival of the company.
2.1.2 Audit Opinion
The auditor's general objective is to provide unqualified opinionson the
financial statements of an entity. Unqualified opinion states that financial
statements have presented fairly within all material matters concerning financial
position, operating results and cash flow
in accordance with GAAP (Guy et al., 2003).
The audit opinion is stated in an audit report. Audit report consists of three
paragraphs, including: opening paragraph (opening paragraph), paragraph
paragraph and scope of opinions (opinion paragfraph). The opening paragraph
(opening paragraph) identifies the report audited financial statements and states that
the financial statements are responsibility of the entity's management. In the scope
paragraph The auditor describes the explicit nature of the audit and explicitly states
that the audit conducted has provided an adequate basis for expressing an opinion
on financial statements. And in the opinion paragraph (opinion paragfraph), the
auditor communicate the results of the audit.
There are five types of audit opinions according to Mulyadi (2002), namely:
1. Unqualified opinion. With unqualified opinions, the auditor states that the
financial statements present fairly in all matters that are material in
accordance with generally accepted accounting principles in Indonesia.
10
Audit reports with unqualified opinions are issued by the auditor if the
following conditions are met:
a. All balance sheet reports, profit and loss statements, changes in equity
reports, and cash flow statements contained in financial statements.
b. In carrying out the engagement, all general standards can be met by the
auditor.
c. Sufficient evidence can be collected by the auditor and the auditor has
carried out the engagement in such a way that it is possible to carry out
three standards of field work.
d. The financial statements are presented in accordance with generally
accepted accounting principles in Indonesia.
e. There are no circumstances that require the auditor to add explanatory
paragraphs or modify words in the audit report.
2. Unqualified opinion with an explanatory language added in an unqualified
opinion with explanatory language The situation that is the main cause of
adding an explanatory paragraph or modification of words in the standard
audit report is:
a. Inconsistency in applying general accepted accounting principles.
b. Great doubt about the survival of the entity.
c. The auditor agrees with a deviation from the accounting principles
issued by the Financial Accounting Standards Board.
d. Emphasis on something.
e. Audit report involving other auditors
11
3. Fair opinion with an exception (qualified opinion) Through reasonable
opinions with exceptions, the auditor stated that financial statements present
fairly, in all material respects, the financial position, results of operations,
and cash flows of an entity in accordance with generally accepted
accounting principles in Indonesia, except for the effects of excluded
matters. Fair opinions with exceptions are stated in the circumstances:
a. There is insufficient competent evidence or restrictions on the scope of
the audit.
b. The auditor believes that the financial statements contain deviations
from the generally accepted accounting principles in Indonesia, which
have a material impact, and he concludes not to express unreasonable
opinions.
4. Adverse opinions An unfair opinion is given by the auditor if the auditee's
financial statements do not fairly present financial statements in accordance
with general accepted accounting principles.
5. Not giving a opinion (disclaimer of opinion) With a statement not giving an
opinion, the auditor stated that he did not express an opinion on the client's
financial statements. A statement not giving an opinion is given by the
auditor if he does not carry out an audit that is sufficiently adequate to allow
the auditor to give an opinion on the financial statements. A statement not
12
giving an opinion can also be given by the auditor if he is in a condition that
is not independent in relation to the client.
2.1.3 Audit Opinion Going Concern
Going concern is the survival of a business entity. Going concern is also
used as an assumption in financial reporting insofar as it is not proven that
information indicates the contrary information. Usually information that is
significantly considered contrary to the assumption of business unit survival is
related to the inability of the business unit to fulfill obligations at maturity without
selling most assets to outside parties through ordinary business, debt restructuring,
improvement of operations imposed from outside and activities similar to others.
(Pernyataan Standard Akuntan No.30)
SPAP (Pernyataan Standard Akuntan No.30) states that the auditor must
evaluate whether there is deep doubt about the ability of the business unit to
maintain its survival within a reasonable period of time, not more than one year
from the date of the audited financial statements in the following manner:
a. The auditor considers whether the results of the procedures carried out when
planning an audit, gathering evidence, and completing an audit identify
conditions and events that, if thoroughly considered, indicate the reason for
deep doubt about the entity's ability to continue business during a reasonable
period. Additional information about conditions and events may be needed
13
similarly, the following evidence is suitable to support information that can
help reduce auditor doubts.
b. If the auditor believes that there is doubt about the business unit in
maintaining its survival within a reasonable period of time, it must:
1. obtain information about management plans aimed at reducing the
impact of these conditions and events.
2. establish the possibility that the plan is held effective.
c. After the auditor evaluates the management plan, he concludes whether he
has doubts about the ability of the business unit to maintain its survival
within a reasonable period of time. If management does not have a plan that
reduces the impact of conditions and events on the ability of the business
unit to survive, the auditor considers giving a statement not giving an
opinion.
d. If management has the plan, the next step that the auditor must do is to
conclude the effectiveness of the plan.
1. If the auditor concludes that the plan is ineffective, the auditor stated not
giving opinion.
2. If the auditor concludes the plan is effective and the client disclose in
the financial statement notes, the auditor expresses an unqualified
opinion.
3. If the auditor concludes that the plan is effective but the client does not
disclose in the financial statements, the auditor gives an inappropriate
opinion.
14
In carrying out the going concern audit procedure, the auditor can identify
information about certain conditions that indicate great doubt about the ability of
the business unit to maintain its viable viability, ie no more than one year from the
date of the financial statements being audited (Standar Profesional Akuntan Publik,
2011). The significance of the condition or event will depend on the circumstances
and some including the possibility of only being significant if reviewed together
with other conditions or events. Here are some examples, but not limited to these
conditions or events:
1. Negative trends, for example, repeated operating losses, lack of working
capital, negative cash flow from business activities, important bad financial
ratios.
2. Other instructions regarding possible financial difficulties, such as failure to
fulfill debt obligations or similar agreements, delinquent payment of
dividends, refusal by suppliers to submit requests for ordinary credit
purchases, debt restructuring, non-compliance with capital requirements
such as Article 47 KUHD (Kitab Undang Undang Hukum Dagang, 2015),
the need to find new sources or methods of spending or sale of most assets.
3. Internal problems for example, work strikes or other difficulties in labor
relations, large dependence on the success of a particular project, long-term
commitments that are not economical, the need to significantly improve
operations.
External problems that have occurred as an example of complaint filing
court, issuance of law, or other problems that might endanger the ability of the
15
business unit to operate; franchise loss, licenses, or important patents; loss of major
customers or suppliers; losses due to major disasters such as earthquakes, floods,
droughts that are not insured or insured but with low coverage.
Research on going concern audit opinion including William (2015) in
Harjito (2016) conducted a test by designing the relationship between going
concern opinion and the availability of public information. Discriminant analysis is
used to test the going concern opinion decision model by using a sample of
manufacturing companies that accept going concern opinion and samples of
manufacturing companies that show potential difficulties in going concern
problems but do not accept going-concern opinions.
The first step, William uses a model of 6 financial ratios ranked by auditors.
The six ratios are: Cash Flow / Total Liabilities, Current Assets / Current Liabilities,
Net Worth / Total Liabilities, Total Long-term Liabilities / Total Assets, Total
Liabilities / Total Assets, and Net Income Before Tax / Net Sales. The second step,
entering items contrary to information and mitigating factors as described in
Statement of Auditing Standards (Statement of Auditing Standards No. 34). The
final step, William added measurements of trend and type of opinion the previous
year.
The findings indicate that the model with financial ratios and audit opinion
types of the previous year had the highest overall prediction accuracy of 89.9%
compared to other models. These results indicate that knowledge of financial ratios
16
and types of previous year's audit opinion are very useful in predicting going-
concern audit opinion decisions.
Harjito (2016) examines the effect of variable audit committee existence,
debt default, financial condition, previous year's audit opinion, company size and
auditor scale on the possibility of receiving going concern audit opinion on
companies that are experiencing financial distress. The study proves that the default
debt variable, financial condition, previous year's audit opinion significantly
influence the acceptance of going-concern audit opinion.
Kurniati (2012) examined four prediction models of bankruptcy and the
influence of company growth and KAP's reputation on going concern opinion. This
study uses 54 manufacturing companies listed on the IDX in 2008-2010. The results
of this study indicate that the Altman prediction model is the best prediction model
among the other three models in predicting corporate bankruptcy. The company's
growth and auditor's reputation do not affect the acceptance of going-concern audit
opinion.
Badrun (2010) examined the influence of audit audit quality, company
financial condition, previous year's audit opinion, company growth on going-
concern audit opinion. This study uses all manufacturing companies listed on the
Indonesia Stock Exchange (IDX) during 2005 - 2007. The results of this study
indicate that the variable audit quality, company growth, company financial
condition and company sie does not significantly influence the acceptance of going-
17
concern audit opinion. While the variable opinions of the previous year had a
significant effect.
Suharti (2015) examined how the influence of financial ratios and non-
financial ratios in providing a going concern audit opinion to the auditee. The results
of the study provide evidence that only one financial ratio (liquidity ratio) and two
non-financial ratios (previous year's audit opinion and audit lag) have a significant
influence on the issuance of the going concern audit opinion by the auditor at the
auditee at a 5% significance level while other variables not significant
Table 2.11
Summary of Previous Research
No Researcher
(Year)
Sample Independent
Variable
Analytic
Tool
Result of
Research
1 Badrun
(2010)
All
manufacturing
companies
(which
experience
financial
distress)
-Audit quality
- financial
conditions
-audit opinion
the previous
year
-company
size
-company
growth
Logistic
Regression
Audit
quality,
financial
condition,
audit
opinon,
company
size and
company
growth are
not
significant,
while audit
opinion
previous
year had
significant
effect
18
2 Kurniati
(2012)
54
manufacture
company
(which
experience
financial
distress)
-Auditor
Reputation
-Company
Growth
-Models of
Bankruptcy
-Audit
Opinion
Going
Concerns
Logistic
Regression
Auditor
Reputation,
Company
Growth is
does not
have
significant
influence,
while model
of
bankruptcy
had
significant
influence
3 Alichia
(2013)
88 manufactur
company
-audit opinion
the previous
year
-company
size
-company
growth
Logistic
Regression
audit
opinion the
previous
year had a
significant
influence,
while
company
size and
company
growth does
not have
significant
influence
4 Aisiah
(2012)
37 manufactur
company
-Audit quality
- financial
conditions
-audit opinion
the previous
year
-company
size
-company
growth
Logistic
Regression
financial
conditions
has
significant
influence
while Audit
quality,
audit
opinion the
previous
year,
company
size and
company
growth does
not have
significant
influence
19
5 Khotimah
(2015)
108
manufacturing
company
-Audit quality
- financial
conditions
-audit opinion
the previous
year
-company
growth
Logistic
Regression
audit
opinion the
previous
year had
significant
influence
while Audit
quality,
financial
conditions
and
company
growth does
not have
significant
influence
6 Sherlita
(2015)
55
manufacturing
company
- financial
condition of
the company
- company
growth
- audit quality
-opini audit
the previous
year
- company
size
Logistic
Regression
company
size has
significant
influence
while
financial
condition of
the
company,
company
growth,
audit
quality
and opini
audit the
previous
year does
not have
significant
influence
7 Indira et al.
(2008)
282
manufactur
company
- liquidity
liquid
-Roof
profitability
- rhythm
activity
- leverage
leverage
Logistic
Regression
Only one
financial
ratio
(liquidity
ratio) and
two non-
financial
ratios
20
- sales growth
ratio
- market
value ratio
- company
size
- Public
accountant
firm
reputation
-opini audit
going
concern the
previous year
- Auditor
client tenure
audit lag
(previous
year's audit
opinion and
audit lag)
have a
significant
influence on
the issuance
of going-
concern
audit
opinion,
while other
variables
are not
significant.
2.2 Hypothesis Development
In this section several hypotheses and arguments will be proposed
underlying this hypothesis.
2.2.1 Effect of audit quality on the tendency of going concern audit opinion
Good audit quality will produce information that is very useful for users of
financial statements in terms of decision making. Therefore, the auditor is
responsible for providing quality audit services. Auditors who have good audit
quality are more likely to issue a going concern audit opinion if the client has a
going concern problem.
Harjito (2016) found univariate evidence that big four auditors were more
likely to issue going concern audit opinions on companies that experienced
financial distress than non big four auditors. Large scale auditors could provide
21
better audit quality than small scale auditors, including in expressing going concern
problems. The greater the auditor scale, the more likely the auditor to issue a going-
concern audit opinion.
Setyarno et al. (2006) states that large-scale auditors have more incentives
to avoid criticism of reputation damage compared to small-scale auditors. Large-
scale auditors are also more likely to reveal problems that exist because they are
more
strong risk of litigation. The statement means that large-scale auditors have a greater
likelihood than small-scale auditors in reporting the business continuity problems
of their clients if it is proven that their clients have problems in the continuity of
their business. Based on the description above, the first hypothesis proposed is as
follows:
H1: Audit quality has a positive effect on the tendency of going concern audit
opinion.
2.2.2 Effect of financial conditions on the tendency of going concern audit
opinion
The health level of a company can be seen from the company's financial
condition. Companies that have good financial conditions, the auditor will not issue
a going concern audit opinion (Harjito, 2016).
Research Setyarno et al. (2006) using logistic regression shows that the
financial condition variables proxied by The Altman Model have a significant effect
22
on the acceptance of going-concern audit opinion. The results of this study are
consistent with previous studies conducted by Harjito (2016) which provide
evidence that auditors almost never give going concern audit opinions to companies
that do not experience financial distress (financial distress)
Refers to research conducted by Fanny et al. (2005), in this study
bankruptcy prediction models were used to measure the company's financial
condition are The Altman Model. Some previous studies concluded that bankruptcy
prediction models using financial ratios are more accurate than auditors' opinions
in classifying companies bankrupt and not bankrupt (Altman and McGouch, 1974;
Koh and Killough, 1990, Koh, 1991) in Setyarno et al. (2006).
Based on the description above, the second hypothesis proposed is as follows:
H2: The company's financial condition as measured by The Altman Model
(1968) has a negative effect on the tendency of going concern audit opinion.
2.2.3 The effect of the going concern audit opinion of the previous year on
the tendency of going concern audit opinion
The going concern audit opinion that has been received by the auditee in the
previous year will be an important consideration factor for the auditor in issuing the
going-concern audit opinion in the current year if the auditee's financial condition
does not show signs of improvement or the absence of a management plan to
improve the company's condition .
23
Setyarno (2006) examined the effect of the availability of public
information on the going concern audit opinion, namely the type of audit opinion
the company has received. The results show that the discriminant analysis model
that includes the type of audit opinion in the previous year has the highest overall
prediction accuracy of 89.9 percent compared to other models.
Santosa et al.(2007) analyze the factors that influence the tendency of going
concern audit opinion. The results show that the previous year's audit opinion
variable has a positive effect on the acceptance of going-concern audit opinion. So
that if the auditee receives the going concern audit opinion in the previous year,
then the possibility of the auditee to receive the going concern audit opinion back
the following year will be even greater.
Consistent with previous research, the third hypothesis proposed is:
H3: Previous year's audit opinion has a positive effect on the tendency of going
concern audit opinion.
2.2.4 The influence of company growth on the tendency of going concern
audit opinion
In this study the company's growth is proxied by the ratio of sales growth.
Setyarno et al. (2006) suggest that this ratio measures how well the company
maintains its economic position both in its industry and in overall economic
activity. Sales are the company's main operating activities. A company with a
positive sales growth ratio gives an indication that the company is better able to
maintain its survival and the possibility of the company against bankruptcy is small.
24
Therefore, the higher the growth ratio of the company's growth, the less likely the
auditor to issue a going-concern audit opinion.
Petronela (2012) suggests that companies with negative growth indicate a
greater tendency towards bankruptcy so that companies that profit will not
experience bankruptcy because bankruptcy is one of the bases for auditors to
provide going-concern audit opinions, companies that experience growth in the
company the negative will be the higher the tendency to accept going concern
opinion.
Based on the description above, the fourth hypothesis proposed is as follows:
H4: Company growth has a negative effect on the tendency of going concern
audit opinion
2.2.5 Effect of company size on the tendency of going concern audit opinion
Santosa et al. (2007) conducted a study of the factors that influence the
tendency of going concern audit opinion. The results of the study provide evidence
that the size of the company influences the acceptance of going-concern audit
opinion. This result is in accordance with the research of William J. Read et al.
(2015) which provides empirical evidence that there is a negative relationship
between company size and the acceptance of going-concern audit opinion.
Harjito (2015) states that large companies offer higher audit fees than those
offered by small companies. In relation to the significant audit fee, the auditor may
hesitate to issue a going concern audit opinion to a large company.
25
Based on the description above, the fifth hypothesis proposed is as follows:
H5: Firm size has a negative effect on the tendency of going concern audit
opinion
2.3 Research Framework
This study seeks to examine the effect of audit quality, conditions company
finance, previous year's audit opinion, company growth, and company size towards
the tendency of going concern audit opinion acceptance. The proposed framework
is as follows:
INDEPENDENT VARIABLE
DEPENDENT VARIABLE
Figure 2.3 1
Research Framework Scheme
AUDIT QUALITY (H1+)
COMPANY FINANCIAL
CONDITION (H2-)
PREVIOUS YEAR AUDIT
OPINION (H3+)
COMPANY GROWTH (H4-)
COMPANY SIZE (H5-)
ADMISSION OF
GOING
CONCERN
AUDIT OPINION
26
CHAPTER III
RESEARCH METHOD
3.1 Data Colllecting and Processing
3.1.1 Population and Samples
Population defines as the generalization area to be studied
which has the certain quality and characteristics settled by researcher.
In this research, the population includes manufacturing companies
listed in the Indonesia Stock Exchange (IDX). From that population,
the researcher takes samples from manufacturing companies’
financial statements from year 2015-2017 listed on Indonesia Stock
Exchange (IDX). The determination of company in selecting sample
for this study will be done by purposive sampling method which is
chosen based on the following criteria:
1. The Auditee was registered on the Indonesia Stock Exchange
before January 1, 2017 because the year of observation was 2015
- 2017.
2. Publish financial statements as of December 31 from the year
(2015 - 2017)
3. Published the independent auditor's report the previous year
(2015-2017)
4. Having net income after tax which is negative at least one
financial statement period during the observation period.
27
No. Sample Criteria Total
1 Manufacturing companies listed in the
Indonesia Stock Exchange (IDX) for the
period of 2015-2017
144
2 Manufacturing companies are de-list
during the research period (2015-2017)
(7)
3 Manufacturing companies are always
experience positive after-tax net income
during financial statements during the
research period (2015-2017)
(110)
4 Manufacturing companies with audit
reports
(5)
Sample per year 22
Total Sample (x3) 66
Table 3.1.12
3.1.2 Variable Measurement
Table 3.1.23
Variable Indicator Scale Data Source Instrument
Audit Quality Big 4 / non big
4
Dummy Secondary Audit Report
Company
Financial
Condition
Altman Ratio Secondary Financial
Statement
Previous
year’s audit
opinion
GCO/non-
GCO
Dummy Secondary Audit Report
Company
Growth
Sales Growth
Ratio
Ratio Secondary Financial
Statement
Company size Total Assets Ratio Secondary Financial
Statement
28
3.2 Secondary Data
This research uses secondary data as the main resource.The
secondary data is any information that has been obtained from previous
researches, articles,books, journals and competent website such as
Indonesia Stock Exchange (IDX). The data collected is practical as it
provides the researcher any established study in order to broaden the area of
research itself. The researcher use the data that have been issued by
Indonesia Stock Exchange (IDX, 5 may 2019).
3.3 Variables and Measurements
3.3.1 Dependent Variable (Y)
Dependent variable is a variable that evolves into the primary
concern of research which is properly specified as the Y variable. This
variable is dependent on the effect of any other factors. The dependent
variable is also referred as the result variable. In this study, the dependent
variable is going concern audit opinion. Going concern is a change in auditor
carried out by the client company without any regulation that require client in
transferring its auditor. Currently, Going concern is dummy variable. If the
company receive going concern audit opinion, there will be given a value of
1, whereas value of 0 will be given if the company does not given going
concern audit opinion.
29
3.3.2 Independent Variables (X)
3.3.2.1 Audit Quality
Audit quality variables in this study are proxied using the
auditor scale. This variable is measured using dummy variables,
where category 1 for auditors is incorporated in a large scale and
category 0 is for auditors on a small scale
Based on research by Sarah Butcher (2017), the big 4 KAP
Indonesia in 2015-2017, namely:
1. KAP Delloite Thouch Tohmatsu (Affiliated with KAP Hans
Tuanakotta and Mustofa)
2. KAP Price Waterhouse Coopers (Affiliated with KAP Drs.
Hadi Susanto and partners)
3. KAP Ernts & Young ( Affiliated with KAP Hanadi,
Sarwoko, and Sandjaja)
4. KAP Klynveld Peat Marwick Goerdeler/KPMG (Affiliated
with KAP Sidharta, Sidharta and Harsono)
3.3.2.2 Company Financial Condition
In the research on going concern audit opinion, Fanny and Saputra
(2005) used one bankruptcy prediction models to measure the
company's financial condition, namely The The Altman Model.
1. The Altman Model (1968)
30
Altman (1968) in Setyarno et. al. (2006) found that low probability
and solvency had the potential to experience bankruptcy. Altman
developed a bankruptcy model using 22 financial ratios classified
into five categories, namely liquidity, profitability, leverage, market
test ratios and activities. Altman developed a bankruptcy model
using the Altman model as follows:
Z = 1.2 Z1 + 1.4 Z2 + 3.3 Z3 + 0.6Z4 + 0.999 Z5
Where :
Z1 = Working capital/total asset
Z2 = Retained earning/total asset
Z3 = Earnings before interest and taxes/total asset
Z4 = Market capitalization/book value of debt
Z5 = Sales/total asset
To calculate Z Score can be done by calculating the fifth number of
ratios taken from financial statements. By multiplying these numbers
with the Altman derived coefficient, the results are summed
(Solikhah, 2007). Research conducted by Altman for companies that
are bankrupt and not bankrupt shows a certain value.
31
Table 3.3.2.24
Criteria for the cut off point of the Z Score Model
Criteria Nilai Z
Not Bankrupt / healthy if Z more
than (>)
2,99
Bankrupt if Z less than (<) 1,81
Bankrupt Zone (grey area) 1,81-2,99
3.3.2.3 Previous Year Audit Opinion
Setyono et al. (2006) defines audit opinion received by the
auditee in the previous year. This variable is measured using a
dummy variable. If the company receives a going concern audit
opinion (GCAO) in the previous year it will be coded 1 while if the
company receives a non going concern audit opinion (NGCAO) it
will be coded 0.
3.3.2.4 Company Growth
The sales growth ratio is used to measure the ability of the
auditee in company-level growth. The ratio is as follows:
𝑆𝑎𝑙𝑒𝑠 𝐺𝑟𝑜𝑤𝑡ℎ =𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 𝑡 − 𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 𝑡 − 1
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠 𝑡 − 1
32
3.3.2.5 Company Size
Company size is a variable used to measure the size of a
sample company. Measurement of variables is calculated using the
natural logarithm of total assets.
3.4 Research Model
3.4.1 Descriptive Statistics Analysis
Descriptive statistical analysis is used to describe the
variables in the study which include the number of samples, the
average value, the maximum value, the minimum value and the
standard deviation
3.4.2 Inductive Statistics Analysis
Inductive statistical analysis is used to test the proposed
hypothesis. In this study, hypothesis testing was carried out by
multivariate analysis using logistic regression, the independent
variable being a combination of metric and non metric (nominal).
This analysis technique does not require more normality tests and
classic assumption tests on the independent variables (Ghozali,
2011). Gujarati (2003) in Setyarno et al. (2006) states that logistic
regression ignores heteroscedasity, meaning that the dependent
variable does not require homoscedacity for each of its independent
variables.
33
Because the financial condition variable has four different
proxies, the feasibility testing of the regression model is carried out
with the analysis model as follows:
1. Altman Model (1968)
OGC = + 1 AUDIT + 2Z68 + 3 OPINI + 4GROWTH +
5 SIZE +
Where:
OGC = Dummy variable, audit opinion (category 1
for auditee with going concern audit opinion (GCAO)
and 0 for auditee with non going concern audit opinion
(NGCAO)
α = Constant
AUDIT = Audit quality is proxied by a dummy
variable (1 for auditors who are joined on a large scale
and 0 for non-auditors)
XZMIN,Z68,Z93,S78 = The company's financial
condition is proxied by using four bankruptcy prediction
models.
34
OPINION = Previous year's audit opinion (category 1 if
the going concern audit opinion (GCAO), 0 if not
(NGCAO))
GROWTH = Company Growth Ratio
SIZE = Company size
Testing of the hypothesis in this study is carried out
with the following stages:
a. Assessing the Feasibility of the Regression Model
The feasibility of the regression model was assessed
using Hosmer and Lemeshow's Goodness of Fit Test.
This model is to test the null hypothesis that empirical
data is in accordance with the model (there is no
difference between the model and the data so that the
model can be said to be fit). As for the results (Ghozali,
2011):
1. If the statistical value of Hosmer and Lemeshow's
goodness of Fit Test is equal to or less than 0.05 then
the null hypothesis is rejected. This means that there
is a significant difference between the model and the
value of the observation so that the Goodness fit
model is not good because the model cannot predict
the value of its observations.
35
2. If the statistical value of Hosmer and Lemeshow's
Goodness of Fit Test is greater than 0.05, then the
null hypothesis cannot be rejected and means the
model is able to predict the value of its observations
or it can be said that the model is acceptable because
it is in accordance with the observational data.
b. Assessing the Fit Model (Overall Fit Test Model)
This test is used to assess models that have
been hypothesized to have been fit or not with data.
The hypothesis for assessing fit models is:
H0: The model hypothesized to be fit with data
H1: The hypothesized model is not fit with the data
From this hypothesis, so that the model is fit
with the data, H0 must be supported. Statistics used
are based on Likelihood. The Likelihood L of the
model is the probability that the hypothesized model
describes the input data. To test the null hypothesis
and alternative, L is transformed into -2 LogL. The
SPSS output provides two LogL -2 values, one for
models that only include constants and one model
with constants and additions free. The reduction of
the value between the initial -2LLL and the value of
36
-2LogL in the next step shows that the model is
hypothesized to be fit with the data (Ghozali, 2011).
The Likelihood log in logistic regression is similar to
the definition of "Sum of Square Error" in the
regression model, so that the decrease in the
Likelihood Log model shows an increasingly better
regression model.
c. Parameter Estimates and Interpretations
Parameter estimates can be seen through regression
coefficients. Regression coefficients of each tested
variable show the form of the relationship between
variables with one another. Hypothesis testing is
done by comparing between probability values (sig).
If you see a significant number smaller than 0.05 then
the regression coefficient is significant at the level of
5%, meaning that H0 is rejected and H1 is supported,
which means that the independent variable
significantly influences the occurrence of the
dependent variable. Vice versa, if the significance
number is greater than 0.05, it means that H0 is
accepted and H1 is not supported, which means that
the independent variable does not significantly
influence the occurrence of the dependent variable.
37
CHAPTER IV
RESULT ANALYSIS & DATA INTREPETATION
4.1 Data Description
4.1.1 Descriptive Statistics
Descriptive statistics are a primary component of biometric
analysis and a requirement for the statistical evaluation. Descriptive
statistics present the conception of variable characteristics that have
been observed based on the SPSS version 25. Variables in
descriptive statistics that used in this research can be seen in Table
4.1.1.
Table 4.1.1 5
Descriptive Statistics
N Minimum Maximum Mean Std. Deviation
X1 66 .00 1.00 .5152 .50360
X2 66 .00 1.00 .7727 .42228
X3 66 513.00 727.00 615.2273 55.82577
X4 66 1080645161.0 601.00 222425980.0606 140614301.62290
X5 66 248.00 1746935201.00 52082927.4242 29692215.9735
Y 66 .00 1.00 .6364 .48473
Valid N
(listwise)
66
38
Table 4.1.1 above presents any statistic value including
minimum, maximum, mean, and standart deviation for each
independets variables and dependent variable as well. There are 66
samples that will be used in this research. Y is the proxy for Audit
Going concern opinion, while the independent variables include X1
(Audit Quality), X2 (Previous Audit Opinion), X3 (Company
Financial Condition), X4 (Company Growth) and X5 (Company
size).
Audit going concern opinion as a dependent variable which
if the company receive going concern audit opinion, there will be
given a value of 1, whereas value of 0 will be given if the company
does not given going concern audit opinion. In the table, the
minimum value equals to 0. It refers to the company which did not
receive auditor opinion going concern. The maximum value that
equals to 1 refers to the company which receive auditor opinion
going concern. The mean value of company that receive auditor
opinion going concern is 0.6364. It means the percentage of mean
value for company that receive auditor opinion going concern in
manufacturing company listed on Indonesia Stock Exchange (2015-
2017) is 63,64% while the standard deviation is 0.4847 or around
48.47%. In conclusion, the mean value is greater than the standard
deviation. It means the error standard is substantively low.
39
Audit quality as the first independent variable is a proxy
which referred based on whom did the audit to the company (Big 4
Public Accounting Firm or non Big 4 Public Accounting Firm) Table
4.1.1 The maximum value that equals to 1 refers to the company
audited by Big 4 Public Accounting Firm which belongs to Charoen
Pokphand Indonesia Tbk in 2015, whereas , the minimum value
equals to 0 will be given if the company is getting audited by non
Big 4 Public Accounting Firm is held by Bentoel International
Investama Tbk in 2017. The mean value is 0.5152 while the standard
deviation is 0.50360. It means the error standard is substantively
low.
Previous audit opinion as the second independent variable is
a proxy referred based on the companiy’s audit report that nominated
.going concern audit opinion (GCAO) or non going concern audit
opinion (NGCAO). The maximum value that equals to 1 refers to the
the companiy’s audit report that nominated going concern audit
opinion (GCAO) 1 which belongs to Indomobil Sukses Internasional
Tbk in 2015, while the minimum value equals to 0 will be given if
the company non going concern audit opinion (NGCAO) which held
by Barito PasificTbk in 2017. The mean value of company
nominated GCAO or NGCAO is 0.7727. It means the percentage of
mean value of company nominated GCAO or NGCAO in
manufacturing company listed in Indonesia Stock Exchange (2015-
40
2017) is 77.27% while the standard deviation is 0.42228 or around
42.228%. In conclusion, the mean value is greater than the standard
deviation. It means the error standard is relatively low.
Company financial condition as the third independent
variable is a proxy referred based on the company bankrupt
prediction percentage. In the table, the minimum value equals to
513.00, It refers to the company which had a lower bankrupt
prediction percentage which held by Wilmar Cahaya Indonesia Tbk,
PT in 2016. The maximum value that equals to 727.00 refers to the
company which had a higher bankrupt prediction percentage which
belongs to Siearad Produce Tbk in 2016. The mean value of bankrupt
prediction percentage of company is 615.2273. It means the
percentage of mean value for company 615.2273 in manufacturing
company listed in Indonesia Stock Exchange (2015-2017) is
615.2273% while the standard deviation is 55.82577 or around
55.82577%. In conclusion, the mean value is greater than the
standard deviation. It means the error standard is relatively low.
Company growth as the fourth independent variable is a
proxy referred based on the company sales growth ratio. In the table
above, the minimum value equals to -1080645161.00 , It refers to
the company with lower sales growth ratio which belongs to
Kedawung Setia Industrial Tbk in 2015. The maximum value that
equals to 601.00 refers to the company with higher sales growth
41
ratio, and it held by Alumindo Light Metal Industry Tbk in 2017.
The mean value of company sales growth ratio is 222425980.0606,
while the standard deviation is 140614301.62290. In conclusion, the
mean value is greater than the standard deviation. It means the error
standard is relatively low.
Company Size as the fifth independent variable is a proxy
referred based on the size of the company. In the table above, the
minimum value equals to -248.00, It refers to the company with
smaller size which belongs to Indocement Tunggal Prakasa Tbk in
2017. The maximum value that equals to 1746935201.00 refers to
the company with the large size, and it held by Wilmar Cahaya
Indonesia Tbk, PT in 2017. The mean value of company size
52082927.4242, while the standard deviation is 29692215.9735. In
conclusion, the mean value is greater than the standard deviation. It
means the error standard is relatively low.
4.1.2 Goodness of Fit Test
The goodness of fit test is used to determine the risk
prediction of models. In chi-square goodness of fit test, the null
hypothesis determines there is no critical difference between the
observed and expected value.
42
Table 4.1.26
Hosmer and Lemeshow Test
Step Chi-Square Df Sig.
1 2.315 7 .940
Table 4.1.2 show the result of hosmer and lemeshow test, which
indicate the p value is 0.940. This reflects the proportion of p-value
is higher than the significance level of 0.50. Meanwhile, H0 is
accepted; it means that the regression model is acceptable for the
analysis because there is no difference between the observed and
expected value.
4.1.3 Overall Model Fit Test
The overall model fit test is conducted based on the -2LL
statistic value or LR value. This testing is done by comparing the
difference in -2LL value called chi-square. If the chi square is bigger
than the chi-square table, it reflects that there is any simultaneous
influence among independent and dependent variable. The result as
the following:
Table 4.1.37
Overall Model Fit TesT
Iteration -2 Log
Likelihood
Coefficients
Constant
43
Step 0 1 86.527 .545
2 86.524 .560
3 86.524 .560
Iteration -2 Log
Likelihood
Constant Coeffiecients
X4
X5
Step 1 1 80.510 .624 -.002 .001
2 76.657 .271 -.002 .002
3 72.510 -,601 -,003 .004
4 72.140 -.832 -.003 .006
5 72.133 -.869 -.003 .006
6 72.133 -.870 -.003 .006
Table 4.1.3 presents the beginning value of -2 log
likelihood (-2LL) and ending value of -2 log likelihood (-2LL).
The beginning value is 86.524, while the ending value is 72.133.
There is a decreasing value among those -2LL which is 14.391. It
can be concluded that the declining value in this test represent the
hypothesis fits the data.
4.1.4 Simultaneous Test (F- Test)
F-test defines as the statistical test that measure the data is
normally distributed by assuring all independent variables
simultaneously influence the dependent variable. This can be used
in logistic regression analysis and interpreted by the Omnibus Test
44
of Model Coefficient.The result of Omnibus Tests of Model
Coefficientsis conducted on the table below:
Table 4.1.48
Omnibus Tests of Model Coefficients
Chi-Square df Sig.
Step 1 Step 14.391 2 .001
Block 14.391 2 .001
Model 14.391 2 .001
Table 4.1.4 presents the Omnibus Test of Model Coefficient
which indicates the calculated Chi-square of 14.391 and F-test value
of 0.001. In point of fact, F-test value is lower than 0.05 level of
confidence. Hence, the null hypothesis is accepted. It interprets
independent variable including audit quality, previous audit opinion,
company financial condition, company growth and company size
simultaneously influence the dependent variable which is voluntary
Audit going concern opinion
4.1.4 Coefficient of Determination (R2)
Coefficient of determination defines as the statistical test
which measures the extent of independent variable by using the
Nagelkerke R Square. Nagelkerke R Square is performed in order to
consider the ability of independent variables in explaining and
45
describing the dependent variables. The range value of
determination is 0 < R2< 1. Hereby the result of the Nagelkerke R
Square is formed on the table below:
Table 4.1.59
Determination Coefficient (R2)
Step -2 Likelihood Cox & Snell
R Square
Nagelkerke R
Square
1 72.133a .196 .268
Table 4.1.5 presents the result of Nagelkerke R Square value is
positive 0.268.This test indicates the value of Nagelkerke R Square
is closer to 0. Thus, independent variables have less competence in
explaining the dependent variable. In other words, the percentage of
26.8% of Nagelkerke R Square indicates that only 26.8% of audit
quality, previous audit opinion, company financial condition,
company growth and company size which explains the audit going
concern opinion out of 100%. Nonetheless, the residual percentage
of Nagelkerke R Square value which is 85.6% indicates that there
are other variables that also have significant effects towards audit
going concern opinion.
4.1.5 Partial Test (T- Test)
Partial test (t-test) is intended to recognize The influence
of audit quality, company financial condition, previous year's audit
46
opinion, company growth and company size on the tendency of
going concern audit opinion acceptance. This test can be used in
logistic regression analysis and interpreted by the Wald test. Hereby,
the result of the Wald test is formed on the table below:
Tabel 4.1.610
Partial test (t-test)
B S.E. Wald df Sig. Exp(B)
Step 1a X4 -.003 .001 4.680 1 .031 .997
X5 .006 .002 7.088 1 .008 1.006
Constant -.870 .712 1.492 1 .222 .419
Hypothesis 1 (Audit Quality)
H1 : Audit quality has a positive effect on the tendency of going
concern audit opinion.
From the result, it shows that audit quality has an
insignificant influence toward audit going concern opinion. This
result is in accordance with the researcher’s first hypothesis that is
already created based on the theory.
Hypothesis 2 (Company Financial Condition)
H2 : The company's financial condition as measured by The
Altman Model (1968) has a negative effect on the tendency of
going concern audit opinion.
47
From the result, it shows that company financial condition
opinion has an insignificant influence toward audit going concern
opinion. This result is in accordance with the researcher’s second
hypothesis that is already created based on the theory.
Hypothesis 3 (Previous Audit Opinion)
H3 : Previous year's audit opinion has a positive effect on the
tendency of going concern audit opinion.
From the result, it shows that previous audit opinion has an
insignificant influence toward audit going concern opinion. This
result is in accordance with the researcher’s third hypothesis that is
already created based on the theory.
Hypothesis 4 (Company Growth)
H4 : Company growth has a negative effect on the tendency of
going concern audit opinion
Based on the Table 4.1.6 presented above, the company
growth has the significant value of 0.031 with 0.05 level of
confidence. The result indicates that the value is smaller than alpha
5% (0.031 < 0.05). This concerns shows that the value for the
company growth variable is positively significant at 5% level, which
supports H4.
48
Hypothesis 5 (Company Size)
H5 : Firm size has a negative effect on the tendency of going
concern audit opinion
Based on the Table 4.1.6 presented above, the company size has the
significant value of 0.008 with 0.05 level of confidence. The result
indicates that the value is smaller than alpha 5% (0.008 < 0.05). This
concerns shows that the value for the company size variable is
positively significant at 5% level, which supports H5.
4.2 Result and Discussion
4.2.1 The Influence of Audit Quality on Audit Going Concern
Opinion
Audit quality variables that are proxied with accounting firms
affiliated with big four and those not affiliated with big four
accounting firm shows a positive coefficient of 0.179 with a
significance of 0.398 and greater than 0.05 (5%), meaning that this
variable has a directional direction and does not significantly
influence the acceptance of going-concern audit opinion. Based on
the previous description, it was explained that audit quality has an
effect on the acceptance of going-concern audit opinion. However,
this research is in line with the research conducted by Aiisiah (2012),
Pandiangan (2013) and Khotimah (2015) who found evidence that
audit quality proxied by big four accounting firms does not
49
significantly influence the acceptance of going-concern audit
opinion. However, these results are not consistent with the studies
of Januarti (2008), Tamba (2009) and Noverio (2011), which are
proxied by the size of big four accounting firm which proves that
audit quality affects the acceptance of going-concern audit opinion
4.2.2 The Influence of company financial condition on Audit
Going Concern Opinion
The variable financial condition shows a negative coefficient
of 0.190 with a significance level of 0.530> 0.05 which means H2
cannot be supported, thus it can be concluded that the financial
conditions measured by the Revised Altman do not significantly
influence the going concern audit opinion. In giving a going concern
opinion, an auditor should pay attention more to the financial
condition of the company. Financial statements that do not have
serious financial problems, have no liquidity problems, have
sufficient working capital, and do not experience an equity deficit,
so they do not accept going concern opinion. While companies that
experience problems finance, liquidity difficulties, lack of working
capital, as well as continuous losses that have a high chance of
receiving going concern opinion.
50
4.2.3 The Influence of previous audit opinion on Audit Going
Concern Opinion
The results of hypothesis testing the previous audit opinion
did not support the third hypothesis which there is an influence of
previous audit opinion Going Concern Audit Opinion on
Manufacturing Companies listed on the IDX in 2015-2017. This
result is indicated by the regression coefficient of 0.806., which
means that each increase in Company Size by 0.806 unit will
increase the Going Concern Audit Opinion on Manufacturing
Companies listed on the Stock Exchange in 2015-2017 by 0.006
units. Based on the results of testing the profitability variable
produces a significance value of 0.118 and smaller than 0.05. Based
on these significance values indicate that the Company Size
influences Going Concern Audit Opinion. So that it can be stated
that the Company Size influences and is significant towards Going
Concern Audit Opinion on Manufacturing Companies listed on the
Stock Exchange in 2015-2017
4.2.4 The Influence of company growth on Audit Going
Concern Opinion
The company growth with a significance of 0.031. This
means that the research hypothesis is accepted, because the
significance value is <0.05. Thus it can be said that company growth
51
(sales growth ratio) has a significant effect on the acceptance of
going-concern audit opinion. The results of this study are consistent
with the research conducted by Kristiana (2012), Rahman and
Siregar (2012).
This condition is reinforced by the data in this study, the
sample of this study was 22 companies, in 2015-2017 there were 9
companies that received going-concern audit opinions while the
number of companies experiencing negative company growth was
12 companies. Thus, if compared to more number of companies
experiencing negative company growth than the number of
companies that get going concern audit opinion. This means that not
only companies that get going-concern audit opinions experience
negative company growth, but companies that do not get going-
concern audit opinions are also not closed to face the possibility to
experience negative company growth.
4.2.5 The Influence of company size on Audit Going Concern
Opinion
The results of hypothesis testing the Company Size variable
support the fifth hypothesis which there is an influence of Company
Size on Going Concern Audit Opinion on Manufacturing
Companies listed on the IDX in 2015-2017. This result is indicated
by the regression coefficient of 0.006., which means that each
52
increase in Company Size by 1 unit will increase the Going Concern
Audit Opinion on Manufacturing Companies listed on the Stock
Exchange in 2015-2017 by 0.006 units. Based on the results of
testing the profitability variable produces a significance value of
0.008 and smaller than 0.05. Based on these significance values
indicate that the Company Size influences Going Concern Audit
Opinion. So that it can be stated that the Company Size influences
and is significant towards Going Concern Audit Opinion on
Manufacturing Companies listed on the Stock Exchange in 2015-
2017
53
CHAPTER 5
CONCLUSION, LIMITATION AND RECOMMENDATION
5.1 Conclusion
The conclusions of audit quality, company financial condition, previous
audit opinion, company growth, and company size influence towards going concern
audit opinion in manufacturing companies that listed in Indonesia Stock Exchange
Year 2015 - 2017 are summarized as the following:
1. The first hypothesis indicates audit quality has no significant influence
towards going concern audit opinion, it shows a positive coefficient of 0.179
with a significance of 0.398 and greater than 0.05 (5%), meaning that this
variable has a directional direction and does not significantly influence the
acceptance of going-concern audit opinion.
2. The variable financial condition shows a negative coefficient of 0.190 with
a significance level of 0.530> 0.05 which means this hypothesis is rejected,
thus it can be concluded that the financial conditions measured by the
Revised Altman do not significantly influence the going concern audit
opinion3. The third hypothesis indicates that financial distress variable has
negative influence toward voluntary auditor switching since it has the
significant value of 0.159 that is greater than alpha 5% (0.159>0.05).
3. The results of hypothesis testing the previous audit opinion did not support
the third hypothesis which there is an influence of previous audit opinion
54
Going Concern Audit Opinion on Manufacturing Companies listed on the
IDX in 2015-2017.
4. The company growth with a significance of 0.031. This means that the
research hypothesis is accepted, because the significance value is <0.05.
Thus it can be said that company growth (sales growth ratio) has a
significant effect on the acceptance of going-concern audit opinion.
5. The results of hypothesis testing the Company Size variable support the fifth
hypothesis which there is an influence of Company Size on Going Concern
Audit Opinion on Manufacturing Companies listed on the IDX in 2015-
2017. This result is indicated by the regression coefficient of 0.006.
5.2 Limitations
This research has limitation that might be weaken the results of the study.
There are several limitations such as;
1. This research population only uses manufacturing companies that listed in
Indonesia Stock Exchange.
2. The period time uses in this research from 2015-2017. The study period was
only 3 years so that it was unable to determine the trend of using going-
concern audit opinion by the auditor in the long term.
3. This study only uses 6 variables, which are; audit quality, company financial
condition, previous audit opinion, company growth, company size to audit
going concern opinion.
55
5.3 Recommendations
Based on research above there are several recommendations which are:
1. For the future research can use other independent which does not exist in
this study, and uses more than five independent variables so that the results
of the study will be more develop in identifying the acceptance of the audit
going concern opinion more accurately.
2. The observation of period be extended by more than three years so that you
can see the trend of audit going concern opinion acceptance by the auditor
in the long run.
3. For the research can use other sectors in the IDX such as Banking and
Finance, Real State, and mining so that you can see the audit going concern
opinion acceptance trend widely.
56
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59
APPENDICES
60
N Minimum Maximum Mean
Std.
Deviation
X1 66 .00 1.00 .5152 .50360
X2 66 .00 1.00 .7727 .42228
X3 66 513.00 727.00 615.2273 55.82577
X4 66 -
1080645161.
00
601.00 222425980.0
606
140614301.6
2290
X5 66 248.00 1746935201.
00
52082927.42
42
29692215.97
35
Y 66 .00 1.00 .6364 .48473
Valid N
(listwise)
66